New Issue: ANZ Capital Notes 9 (ASX: AN3PL)

On 14 February 2024, Australia and New Zealand Banking Group Limited (AN3), a wholly owned subsidiary of ANZ Group Holdings Limited (ASX: ANZ), launched an offer for ANZ Capital Notes 9 (expected ASX Code: AN3PL), to raise $1.0 billion, with the ability to raise more or less. The purpose of the transaction is to raise regulatory capital (Additional Tier 1) for AN3/ANZ with the proceeds intended to refinance ANZ Capital Notes 4 (ASX: AN3PG) and for general corporate purposes.

The securities are structured as convertible, perpetual, unsecured, subordinated notes. Distributions are expected to be discretionary, non-cumulative, floating rate, franked at the same rate as ANZ ordinary shares (total FY23 final dividend: 56%), and paid on a quarterly basis in arrears until converted or redeemed. The margin is guided at [2.90-3.10]% p.a. above 90-day BBSW. There is no obligation on Holders to pay AN3 if the distribution rate was to become negative.

This security has no fixed maturity date but is scheduled for mandatory conversion into ANZ ordinary shares on 20 September 2033, or later, when conversion conditions have been satisfied. AN3 can choose to redeem or resell the Notes for cash at face value ($100), or convert the Notes into ANZ ordinary shares on 20 March 2031, 20 June 2031, or 20 September 2031, or following a Tax or Regulatory Event, subject to conditions including APRA approval. The Notes will convert into ANZ ordinary shares following a Change of Control Event, subject to conversion conditions.

We recommend that investors Subscribe to AN3PL. At the left-hand side (LHS) of guidance, we do not see a concession to fair value being offered, however we do view the Offer reflecting fair value to investors considering current market dynamics. Our view is the Offer is great value on the right-hand side (RHS), good value at the midpoint and fair at the LHS, and we would recommend scaling bids accordingly.